Sequestration pushes DHS contract spending to lowest level ever

Jared Serbu reports.

The Department of Homeland Security's contract spending continued to decline
during the first year of sequestration and fell to its lowest level ever,
according to a new independent analysis of government contract data.

Compared to its much larger sister agency, the Defense Department, the fiscal
2013 decline in contract obligations by DHS was relatively modest, the latest annual review of Homeland Security spending by the
Center for Strategic and International Studies found. While DoD's contract dollars
shrunk by 16 percent between 2012 and 2013, the decline in DHS was just 3 percent.

There are a couple of reasons for that, according to the authors. For one, DHS
already had undergone a 12 percent reduction in dollars on contracts the year
before, prior to the triggering of the automatic budget caps.

Also, the 2013
numbers got a boost from the sort of big-ticket purchase DHS only makes every few
years: $500 million for the USCGC Munro, one of the large, high tech
national security cutters the Coast Guard is building. Without that single
contract, DHS spending would have dropped by 5.5 percent.

"What you also see is that the sequestration's impact is not evenly distributed
across the DHS components. In fact, it's quite varied," said David Berteau, the
director of the national security program on industry and resources at CSIS.

Among other trends, the report found a large increase — 15 percent —
in the
number of sole source contracts DHS recorded in the Federal Procurement Data
System (FPDS) last year, though Berteau noted the factors behind that data aren't
entirely clear.

"Sole source awards in DHS have gone from about one-seventh of total contract
obligations back in 2009 to two-sevenths in 2013," he said. "However, that
happened at the same time when competitions that only had a single offeror were
declining. So we believe there's a correlation. An awful lot of times, you know
you're only going to get one bid, so if you want to go through the trouble of
documenting a sole-source justification, you probably have a rationale for doing
so under [the Competition in Contracting Act]. It looks like that's probably what
happened in DHS during 2013."

Characterizing the amount of competition in the DHS contracting world depends
a lot on the type of contract one's looking at. There, the data is once again
skewed by the huge cutter purchase, which the Coast Guard procured under a sole
source award to Huntington-Ingalls. But with the same number of contractors
pursuing fewer dollars, the types of procurements — which in prior years
tended to
attract only two bidders — now got the attention of at least three or four,
the
study found.

"Once you get away from the big sole-source contract awards in CBP and the Coast
Guard, you see a very, very competitive environment at the component level across
DHS," Berteau said.

The report also noted a significant shift in the types of contracts DHS components
are using to make awards. The dollars DHS spent on cost-reimbursable type
contracts fell by 18 percent, and time and materials contracts declined by 10
percent. Fixed price contracts, meanwhile, increased by 5 percent.

"This indicates to us a very serious push for fixed price contracts, and it
certainly reinforces the anecdotes we've heard from the companies in the
business," Berteau said.

Data inconsistency still a problem

In the process of drawing up the analysis, the CSIS staff encountered numerous
occasions in which significant data fields were left empty in the federal
procurement data system (FPDS), making it difficult to determine whether, for
example, a given contract was awarded competitively.

The number of contracts DHS failed to label as competitive
versus noncompetitive fell by 66 percent in 2013. That's not an accident, said
Jesse Ellman, a coauthor of the report. He credited Nick Nayak, DHS' chief
procurement officer, for a longstanding and concerted effort to improve the
department's procurement data reporting. Nayak will leave the job later this summer, he told
colleagues Wednesday.

"He has a team that looks at the DHS entries into FPDS every single day to see if
something looks off or if some data is mislabeled," Ellman said. "Because of that,
they've made very significant strides in the quality of their data entry."